About MoneySecrets: MoneySecrets offers a peek into the financial lives of our fellow Kiwis. The story below was written using pseudonyms to remain anonymous. When commenting, please remember that the writer has laid bare their financial life, which can be a scary thing to do. Please be kind, and enjoy!
I’m William, a 30 year old working in architecture. Elizabeth, my partner, is a 32 year old working in early childhood. And we’ve got little Fritz, a 2-and-a-half year old young man. For the last 3 years, we’ve been living 100% off-grid in two tiny houses (less than 10 square meters each), which are set in a beautiful coastal native forest in Northland.
We enjoy living a modest, low impact life close to nature, while making sure we have heaps of time to do the things we love.
|Earning and spending summary|
|Less tax and payroll deductions||-$12,050|
|Less annual spending||-$33,117|
|Equals remaining income||$10,433|
|Net worth summary|
|Less total debt||$180,800|
|Equals net worth||$195,000|
Our financial goals are focussed on enjoying life as much as possible - in both the short and long terms. We also tend to place more value on time than money and possessions.
In the short-term, we’ve planned to just hold ground financially (not going backwards) so we can maximise the time spent with our young child (soon to be children) before they go to school, while also being able to spend plenty of time doing the things we love while we’re still reasonably young ourselves.
In the long term, we aim to be debt free with at least $1 million (in today’s terms) in relatively liquid assets by the time we retire (not including our property) - which if invested in shares should on average yield around $50,000 per annum before tax for us to live off, which is plenty for us when we're retirees.
Currently we’re achieving the first goal, and our rough long term forecasting has us on track to comfortably achieve our second goal.
Our assets are pretty much entirely made up of the bit of land we own and live on (a nice big 4ha of old growth coastal native forest near some beautiful Northland beaches). And while we think our tiny houses are great, they’re probably not worth a hell of a lot. And there’s nothing else really, other than a bit of Kiwisaver which we’ve just got sitting in 100% shares with our bank / mortgage provider, ASB.
It’s been nice to see the prices of the property around us increasing so much, because it means our main asset has been growing well (though there are pangs of gentrification that come with that, which concern us a little because we’d like our kids to have a diverse community in which to grow up).
Real estate: This has grown way faster than we could have ever anticipated thanks to Auckland's mental property price boom, which has had a very tangible impact on Northland prices.
Vehicles: Just a couple of modest but safe cars. They're cheap to run, and not yet old enough to give us endless trouble.
Other (Bitcoin): This is a bit of a laugh, but I bought 0.25 bitcoin for $1,000 just before the 2018 spike. The idea was just to have a little fun and to experiment / gamble in the long term (spending no more than what I could afford to lose). It increased in value to around $7,000 in the space of a month or so before its inevitable crash, which was pretty hilarious, and since then it's just been fluctuating around the $4,000 mark. My plan with bitcoin was to just buy a tiny amount on the off-chance that it'll follow a similar trajectory to something like Microsoft or Apple shares. It's super unlikely, but I could afford to lose the $1,000 I spent. It'll be interesting to see what it gets up to in the next 30 years (I suspect it'll be worth nothing by then), and in the meantime I don't allow for this "investment" in any of our financial planning.
We’re pretty stoked to have such a tiny mortgage - it’s definitely one of the biggest financial perks of living in tiny houses, and it’s really nice not feeling too tied down by the financial burdens of a big fixed-term mortgage.
The mortgage is low for a few reasons. First, we managed to get the land at a steal because the vendor was getting a bit desperate due to a looming district planning rule change, and this was before property prices went all silly. Second, we managed to pay off a solid chunk before Fritz turned up and we dropped to a single income. Third, we designed and built the tiny houses ourselves, which means they cost us bugger all.
We’ve chosen to go with a floating mortgage with ASB, despite the higher interest rates than if we went with a fixed term plan (we're currently paying 4.55% interest), because we enjoy the flexibility it offers. If we decide, for example, to leave our jobs entirely, build a house truck and hit the road for a year, or drop some significant money on improving our property (which is on our radar), then no worries, we don’t have to ask the bank’s permission - which couldn’t be said for a fixed term mortgage. It’s also great because you can just chuck all your money straight into the floating mortgage account, and spend directly from it (which is what we do), which ensures you’re always minimising interest on the debt, and you can pay it off faster / slower or whatever suits you best at the time. It just means you’ve got to be a bit diligent with making sure you manage your money well to ensure that it actually gets paid off.
Our student loans are also still significant, but the 0% interest thing means we’re not too worried about them. There’s no urgency there really, so long as we’re able stay on track with our financial goals.
The debt under "Other": I owe my old man about a year's worth of rent, he charges interest at a rate that's 1% less than current bank interest rates, so the incentive to pay this debt off is low because we'd essentially be paying off a lower interest loan with a higher interest loan.
|Salary or wages||$47,500|
|Total annual income||$55,600|
|Annual after-tax income||$43,550|
|Total weekly income||$1,069|
|Weekly after-tax income||$837|
Salary: We've based our income on the previous 12 months. William earned $44,000 for 30 hour flexible weeks. Elizabeth only worked 6 of the last 12 months, with 7 hours each week, making up the extra $3,500.
Other: Due to our low income, we're eligible for tax credits as part of the Working for Families scheme. Essentially this is a little bonus for us, and we don't rely on it financially (to meet our plan of breaking even for now) - it just goes straight into paying off the mortgage.
I mentioned it in our goals, but we made the conscious decision to sacrifice income for free time during what we consider to be these really important and beautiful years while the child(ren) are young and we’re also still relatively young and still able-bodied.
On top of that, we’re keen to live more simply than most people in our generation (changing our expectations around things like luxuries / housing / spending / etc), mostly because we just really enjoy it, but it also means we can spend less time working, and more time doing the things we love.
It’s not all roses though… our solar electric system is only sized to allow me to work from home and not much more (we’re too stubborn to rely on fossil-fuel power generators). So there are no power-hungry appliances like heaters, fridge, freezer, toaster, etc. Other than lights, we don’t use electricity after sundown - in the depths of winter sometimes that extends to the whole day. The no-fridge / freezer-thing often surprises people, but honestly we don’t find ourselves needing it because, for environmental reasons, we don’t eat dairy (other than the occasional treat in the form of a small block of mainland tasty, which keeps out of the fridge long enough for us to get through), and for the same environmental reasons, we only have supermarket meat once a week which we eat that night (supplemented by fish I catch, and the odd possum-leg-stew, which is actually really yum). And other than meat / dairy, we’ve found that there’s not much reason for a fridge - veges from the supermarket often keep better in the air where they can breathe, or in a vase of water for the leafy things (just like how you keep flowers). There’s only really a couple things we’d like a fridge / freezer for, and that’s keeping leftovers, meaning we wouldn’t have to cook every single meal (to avoid wasting food / leftovers, we’ve just become good at meal portions when we cook), and having a cold beer in summer. We also don’t have hot showers (that fossil fuel thing again), just a cold shower outside which we’ve grown to genuinely love. For a treat we built an outdoor fire bath which we use maybe once a month or so, and we boil water for Fritz’s tub every evening.
We operate a composting loo, share one room for sleeping, and on top of all that, a toddler in a tiny house is pretty intense at times. It’s quite a different way of life, and to lots of people it possibly seems a bit mad, which we understand. But it’s not too different to how most of our grandparents grew up - and they turned out to be pretty cool people. We love it, we’ve got the things we consider to be essential, and it’s a bit of an adventure, which we reckon’s pretty fun. At the end of the day, the best thing is seeing how happy and healthy everyone in the family is. We consider ourselves very lucky.
As for time spent working, I work a flexible 30 hour week for a company that has some great values, and I work from home. This enables me to surf when the surf’s on, or fish / dive when the conditions are right, to spend more time in nature, and to have more time with our son every day - then just make up the time later in the week. I know I could earn more in a more conventional job (both hourly rate and increased hours), and it’s sometimes hard to get over that fact that I get paid less than other people in equivalent roles with similar experience. But the trade off is in the flexibility, and in the bigger scheme of things it wouldn’t be worth it to me if I had to sit in a car every day burning fossil fuels and wasting time on a commute, then working in an office, and miss out on scoring great waves all the time.
Elizabeth has just started working again in the last 6 months, but only for 7 hours a week, and little Fritz gets to go along with her because she works in early childhood. It’s not so much for the financial gains (which are minor), but rather because Elizabeth gets to enjoy a sense of purpose outside of parenting (putting energy into something positive like a community early childhood centre), and to keep her teacher registration up-to-date, all while still having lots of time to do an amazing job providing Fritz with what we think is an exceptional up-bringing, and keeping us all ship-shape at home. The other major perk is that Fritz gets to enjoy a solid bit of socialising and mucking around with his mates which he loves, and it's great for his development (socialising doesn’t come naturally when you’re isolated in the bush).
Longer term, when the child(ren) have started school, Elizabeth will pick up full time work again. This essentially means, presuming we maintain our current spending (which is what we plan to do), that every dollar earned by Elizabeth will be a dollar saved. In which case we’ll have our mortgage paid off in no-time, can start saving again, and start the journey of achieving our long-term goals.
|Groceries & supplies||$10,219|
|Eating & drinking out||$427|
|Sports & hobbies||$200|
|Gifts & donations||$773|
|Total annual expenses||-$33,117|
|Total weekly expenses||-$637|
The expenses above are for the previous 12 months, rather than a budget for the following year. We expect the upcoming 12 months to be similar to above, but I’ve used historic spending since we’ve been tracking it anyway.
We don’t have a set budget, but I do track and graph our financial position once a month to get an idea of our general financial position over time (all assets minus all debts). I find it really useful to be able to visually see our financial trend, and if we have a month that’s been a bit low, then we can address where the money went - otherwise we just buy what we need when we need it, and we don’t have to worry about strict budgets. So long as that asset / debt line keeps going where we’ve planned for it to go, we're happy.
We do spend a little more on some things that we consider important. For example, we buy high quality food, and Elizabeth puts in an epic effort to buy from more responsible sources and in a way that almost entirely eliminates packaging waste in an effort to reduce our impact, which oddly costs more (stoked to say it takes us about 6 months to fill a rubbish bag!)
It’s also really nice that living off-grid, particularly in a modest low-impact way, is inherently really cost effective. No regular commuting and fuel costs, no electricity bills (just an up-front cost which pays itself off pretty quickly), no water charges, we’ve got a nice big food forest coming along which is just starting to produce a semi-decent yield (a food forest is a type of permaculture produce garden where all the plants / trees co-exist in the same garden and provide benefits for each other), there’s plenty of fish to be caught at the bottom of our driveway, and most of our entertainment is provided for free in the form of the beautiful forests, beaches, and estuaries we’re spoilt by, as well as our great local community.
Some more explanation of these expenses below:
Housing: Most of this is money spent on home improvements - new decks, verandahs, garden supplies, etc. Less than half of that amount is mortgage interest.
Transport: Had a couple pretty expensive warrants this year...
Utilities: Living off-grid means hardly any utility costs.
Shopping: We almost never buy new because we prefer to keep our impact low. Op shops are absolute goldmines where you can often find really high quality stuff for bugger all, which is great especially when combined with Elizabeth's skills on the sewing machine.
Kids: We use re-usable nappies which we bought ages ago second hand, and a very small selection of high quality second hand toys (we're constantly trying to convince people not to give him lots of bulky plastic toy gifts). We've got heeeaps of books for Fritz, which he loves and which also cost next-to-nothing from Op shops. He also plays outside a lot too. We reckon he's pretty lucky to have a whole forest to enjoy, plus we've set up a sweet obstacle course / playground in the bush for him with swings, rope courses, hammocks, etc - great for his physical development. He gets to use his imagination heaps too in his verandah play space / kitchen / workbench / yoga studio / whatever he decides it is next.
Personal care: We cut out own hair, which is usually uneventful but sometimes hilarious.
Travel: This is made up of a couple camping trips and a few family get-togethers.
|Earning and spending summary|
|Less tax and payroll deductions||-$12,050|
|Less annual spending||-$33,117|
|Equals remaining income||$10,433|
Currently we don’t have much money left over at all, which we expect, because it’s part of our plan, and any money we do have just sits in the mortgage account to make sure we’re minimising our interest as much as possible.
Inviting feedback from readers
I hope this offers a bit of a different perspective on things. There’s lots of ways to approach financial life, and we’ve found that more isn’t always better. You’ve just got to go with whatever makes you and your family genuinely happiest, and we’re lucky that for us, we’ve found what works in a modest off-grid life in the bush.
We’re always open to other ideas and if anyone’s got any good tips on how we could improve on our plan (or anything else), we’d love to hear from you. Similarly, if anyone’s got any questions, please don’t hesitate to ask.